ECONOMY-BRAZIL: Pharmaceutical Transnationals Under Fire

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 4 2000 (IPS) - Brazil’s pharmaceutical industry, dominated by transnational companies, faces charges of forming a cartel and propagating abusive price increases. The sector is also under investigation by a parliamentary commission and faces pressures from the nation’s Health Ministry.

The Justice Ministry’s Economic Law Secretariat initiated administrative proceedings Thursday against 46 companies accused of imposing abnormally high prices on medications.

The action is in response to findings by the Parliamentary Investigative Commission (CPI) that the prices of 301 medications increased much more than the inflation rate of 84 percent since July 1994. In some cases the prices had more than tripled.

The situation of the laboratories, especially those of foreign capital (which control 85 percent of the Brazilian market), worsened with the release of a report by the Ministry of Development, Industry and Commerce, which noted important price discrepancies in their imported raw materials.

Schering Plough, for example, imported gentamicin sulfate at 610.87 dollars per kilo last year, while Sanphar Chemocil obtained the same quantity of the substance for just 21.45 dollars per kilo.

This triggered suspicion that overpricing imports might be a mechanism for companies to send money overseas illegally.

José Eduardo Bandeira de Mello, president of the Brazilian Pharmaceutical Industry Association (Abifarma), made up of 59 laboratories – mostly transnationals -, tried Thursday to neutralise the charges in statements before the CPI in the Chamber of Deputies, which has been investigating the issue since December.

Bandeira de Mello denied abuses and cartel activity, and assured that the industry prices correspond to production costs. He emphasised that companies regularly provide such data to the Economic Law Secretariat.

The devaluation of Brazil’s currency, the real, in January 1999, pushed the laboratories’ costs above the inflation rate because most of the pharmaceutical inputs are imported, he explained.

Bandeira de Mello launched criticisms against the government for “omission in regulating medication prices” and of not providing adequate public assistance in this area.

Government production or purchase of pharmaceutical products to distribute among the population’s poorer sectors would be one solution.

But Bandeira de Mello said he doubted the government’s ability to operate its own pharmaceutical company because it lacks “technological effictiveness and resources.”

The president of the CPI, Nelson Marchezan, recognised the validity of the charges against the government, but accused the companies associated with Abifarma of seeking unlimited profits, non-compliance with economic regulations and putting pharmaceutical products “beyond the reach of half the population.”

The foreign pharmaceutical industry imposes prices in Brazil that are higher than in the United States and provide little for the country in technological terms, affirmed Sara Kanter, director of the National Laboratories Association, which represents Brazilian- owned companies.

One of the mechanisms for pushing up prices is using “sophisticated” containers and components, according to Kanter. She expects a developmental boost for the national industry with the release of “generic” medications.

The Health Ministry authorised the production of six such medications, which assure the same effectiveness as the name-brand products, but are 36 to 56 percent cheaper.

José Serra, minister of Health, reported that public hospitals are required to use generic medications because “the additional expense for products of identical quality is unjustified.”

Another 170 generic medications, all proposed by Brazilian-based companies, await analysis by the National Health Monitoring Agency before they can be released, according to a law passed last year.

With these new products, the Health minister hopes to counteract the price abuses that, in his opinion, are perpetrated by the large transnational labs and which explain why they resist manufacturing generic medicines.

Officials from one company told the CPI of industry plans to boycott the Generics Law by retaliating against distributers who agree to sell the new and cheaper medications.

The legal offensive against companies dominating a 7.6 billion- dollar market has already resulted in other practical outcomes. One example is that companies can no longer offer free samples or gifts of medications to doctors, a common practice used to convince the physicians to prescribe name-brand products.